Tax hikes for wealthy and corporations, increased pension funding are likely to win approval – then head to Christie’s desk for probable veto

There were calls for bipartisanship and long-term planning. There was talk of solving, once and for all, longstanding fiscal problems like the public-employee pension system and Transportation Trust Fund.

But at the end of the day it was party lines and looming elections that carried the day.

A $35.3 billion spending plan crafted earlier this week by Democrats who control the state Legislature was approved yesterday along party lines by committees in both the Assembly and Senate, setting up floor votes tomorrow in both houses.

Several pieces of legislation tied to the Democrats’ budget, including bills that would bring in more than $1 billion in new revenue by hiking corporate taxes and establishing a new income-tax rate for earnings over $1 million, also advanced yesterday over the objections of business leaders and Republicans who said enactment of the two bills would destroy New Jersey’s economy.

Those bills -- also scheduled to be voted on tomorrow by both full houses – are expected to be vetoed summarily by Gov. Chris Christie, a second-term Republican who is expected to announce shortly whether he will officially be a candidate in the GOP’s 2016 presidential primary.

“This is our sixth budget with him, we know what to expect,” said Senate Budget and Appropriations Committee Chairman Paul Sarlo (D-Bergen).

But Christie isn’t the only one weighing political considerations this year as the state moves closer to the July 1 deadline for a balanced budget that’s set in the state constitution. All 80 Assembly seats are up for grabs this fall and Republicans have made it clear that they want to take back control after more than a decade of being in the minority.

The 2017 gubernatorial election is also looming, and the Democrats’ budget proposal -- calling for increased funding for the pension system and higher education, along with tax credits for low-wage workers -- in many ways could serve as a template for how the State House will operate if a Democrat becomes governor in 2018.

Some of those political considerations were on display yesterday as lawmakers discussed the budget bill and the pieces of legislation tied to the Democrats’ spending plan, including a a creative measure that seeks to appropriate during the current fiscal year $300 million in tax revenue that has yet to be officially acknowledged by the state Department of Treasury.

And that $300 million appropriation would not be counted against the current fiscal year’s obligations, but would instead be regarded as a partial “pre-payment” of what the state will owe the chronically underfunded pension system during the next fiscal year.

That proposal comes as Democratic leaders have made pension funding a key issue in the wake of a major state Supreme Court ruling earlier this month that upheld Christie’s decision to walk away from 2010 and 2011 pension-funding laws that committed the state to making a series of contributions into the chronically underfunded pension system.

Christie has proposed putting $1.3 billion into the pension system during the next fiscal year, while Democrats, under pressure from public-worker unions, would contribute $2.8 billion – plus the $300 million “pre-payment.”

Senate President Stephen Sweeney – one of the Democrats expected to run for governor in 2017 – took to social media yesterday to praise passage of the pre-payment bill, which he’s sponsoring.

“Paying $1 now saves $3 later,” Sweeney said on Twitter.

But several Republicans questioned the accounting maneuver during the Senate Budget and Appropriations Committee meeting. And adding to the confusion was another supplemental spending bill that would allocate another $212 million for the pension system -- but apply it to the current fiscal year’s obligation.

“Why wouldn’t we take this extra revenue and dedicate it to the current fiscal year where we have not been able to meet our obligation and instead project it forward?” asked Sen. Jennifer Beck (R-Monmouth).

Sarlo, in response, made it clear that it was a Sweeney priority to make the appropriation count toward the 2016 fiscal year pension obligation rather than apply the $300 million to the 2015 fiscal year obligation.

“It all goes into the pension fund,” Sarlo said. “The Senate president wanted to do it in this manner and we’re acting on the Senate president’s bill.”

Other details also became clearer yesterday as budget documents were made public, including the major impact the proposed increased pension funding would have on education spending -- boosting it by nearly $900 million -- because the state covers teacher pensions. The document also revealed another $20 million in funds that are supposed to go toward promoting clean energy would be used for other purposes.

In the Assembly Budget Committee, meanwhile, the sharpest debate came during the discussion of the tax-policy changes, with Republicans accusing the majority Democrats of sending a mixed message to the business community.

On the one hand, the Democrats’ budget preserves $660 million in business tax cuts, while on the other hand it would raise $435 million by hiking the corporate tax rate for one year. The tax increase on income over $1 million could also hit small-business owners, GOP legislators said.

“This game that we keep playing, it’s not what people want,” said Assemblyman Chris Brown (R-Burlington). “They want a solution, not a back-and-forth between business and unions.”

“As we continue to do, divide people instead of coming up with a common solution -- that’s where the courage lies,” Brown added.

But Assemblyman John Burzichelli (D-Gloucester) said it’s the Democrats who are showing courage by stepping up and funding the state’s long-ignored obligations to the pension system, which covers the retirements of an estimated 773,000 current and retired workers.

“This budget that we now send back to the governor will include meeting our obligation on the pension payment for now the second budget in a row,” Burzichelli said. “Last year we know what occurred, we’ll see this year.”

And committee Chairman Gary Schaer (D-Passaic) put the onus squarely on Christie and his administration, saying there’s been a lack of leadership, whether it’s on the pension-funding issue or coming up with a long-term plan for the state Transportation Trust Fund, which only has enough revenue for road, bridge and rail improvements to last through June 30, 2016.

“It’s easy to say no new taxes,” Schaer said. “I don’t want another tax increase and I say that frankly and candidly, but how does one pay for the bills?”

“I do not think that this is the best budget that New Jersey has ever been presented with, but absent any serious discussion, even at this last moment, I would suggest it’s the best result, the best alternative that that we have before us,” he said.